Market demand, green product innovation, and firm performance: evidence
from Vietnam motorcycle industry
Ru-Jen Lin
a
,
*
, Kim-Hua Tan
b
, Yong Geng
c
a
Graduate School of Business & Management, Lunghwa University of ST, Taiwan
b
Business school, Nottingham University, UK
c
Shenyang Institute of Applied Ecology, Chinese Academy of Sciences, China
article info
Article history:
Received 17 November 2011
Received in revised form
28 December 2011
Accepted 1 January 2012
Available online 10 January 2012
Keywords:
Market demand
Green product innovation
Firm performance
Vietnam motorcycle
abstract
This study examines how market demand affects green product innovation, and firm performance in the
context of Vietnamese motorcycle industry. The paper seeks to answer two key questions: (a) how does

important factor in inducing green product innovation. Berthon
et al. (1999) also added that market demand plays a critical role
in firm’s innovation performance. However, they also pointed out
that listening too closely to the voice of customers may impair
firms’ innovation performance. Inkpen and Pien (2006) suggested
that firms collaborating with rivals are more likely to perform
better in innovation than they would otherwise and firms can
accelerate their capability development by R&D cooperation which
helps them to decrease the time and risk involved in product
innovation.
The conflicting findings actually illustrated a gap in green
product innovation literature. To enhance our knowledge and
understanding of green product innovation and to benefit product
designers, marketers, and senior managers, more research is
needed. Therefore, this research aims to address this gap i.e. lack of
empirical research in understanding the relationship of green
product innovation, market demand, and firm performance. More
specifically, the study addresses two important research questions:
a) How does market demand influence a firm’
s green product
inno
vation? and (2) How can green product innovation affect firm
performance? These issues have considerable significance for the
field of sustainable operations and new product introduction. In
essence, green pressures may provide a key channel in the
*
Corresponding author. Tel.: þ886 2 82090812; fax: þ886 2 82094650.
E-mail address: (R J. Lin).
Contents lists available at SciVerse ScienceDirect
Journal of Cleaner Production

a subsidiary of Sany ang motor industrial Corp. DucTho (2011) points
out that Vietnam has a huge motorcycle market potential and is the
worldfourthlargestafterChina,India,and Indonesia.Recognizingthe
market potential, Japanese firms such as Suzuki, Honda and Yamaha
have a strong presence in the Vietnam market.
Moreover, the government’s friendly localization policy further
encouraged the development of the motorcycle industry, in
particular with the presence of Chinese motorcycle manufacturers
in early 2000 (Jalaluddin, 2002; Tseng, 2011a, b). Thus, Vietnam
becomes a fierce competition market for Japanese, Taiwanese, and
Chinese motorcycle manufacturers. The emergence of Chinese
motorcycle manufacturers created an unprecedented change in the
motorcycle market landscape. DucTiep (2007) indicates that
Chinese motorcycles are basic, but affordable to the general public
at low prices. Thus, indirectly helps raise motorcycle ownership in
Vietnam (see Fig. 1).
In contrast, there is a price to pay for the increasing motorcycle
usage i.e. pollution. There are environmental issues at all stages of
a motorcycle’s product life cycle. The need for raw materials led to
scarcity of resources (Zhu et al., 2007). Moreover, exhaust emis-
sions, gasoline consumption, recycle and disposal of wastes, places
much pressures on the natural environment. Recent global initia-
tives on green and sustainable consumption have awakened Viet-
namese consumers i.e. in choosing the most environmental
friendly motorcycles. The green move, in a way, has shifted the
motorcycle market competitive criteria from price to ‘green’, and
created considerable opportunities in the motorcycle industry.
A few researchers (Hoffmann, 2007; Zhu et al., 2008; Yung et al.,
2011) argue that customers increasing awareness of environmental
issues and expectation for gasoline savings have forced motorcycle

sustainable products and integrate environmental friendly
production processes. Nevertheless, many customers are unwilling
to trade off product qualities for a product’s green attributes
(Peattie, 2001). Additionally, customers’ requirements about green
attributes may not align with their actual purchasing behavior
(Wong et al., 1996; Kuckartz, 1998; Prakash, 2002). Hence, how to
harmonize these factors in order to meet market demand is a big
challenge for all existing manufacturing firms. Slater and Narver
(1998) argue that when firms’ timely notice a gap between
supply and demand in the market, the firms can carry out
a breakthrough to fill this constraint through successful innova-
tions. Hence, innovation is becoming a critical mean for
manufacturing fi
rms to survive and improve market position
(Bueno
and Ordonez, 2004; Alegre and Chiva, 2008).
In addition, Monjon and Waelbroeck (2003) found that
customer collaboration has an insignificant impact on product
innovation. Wei and Morgan (2004) posit that market orientation is
a key criterion in successful new product performance.
Triebswetter and Wackerbauer (2008) also argue that market
demand is the necessary factor for environmental innovation.
Chiou et al. (2011) identify that increasingly customers are more
green conscious i.e. looking for products that are fuel efficient, and
environment friendly. Hence, innovation, especially green product
0
5,000,000
10,000,000
15,000,000
20,000,000

H1b: Market demand is positively associated with products
H1c: Market demand is positively associated with economic
performance
3.2. Green product innovation
Nowadays product innovation has beco me a si gnificant
means of firms’ survival and a weapon to sustain m arket
competitive advantage (Gronhaug and Kaufmann, 1988). A good
product innovation performance can help firms to i mprove
market position, affirm brand name, leapfrog competition,
creates a breakthrough and attract new customers (Chandy and
Tellis, 2000; Mu et al., 2009 ). Wagner (20 05) found that focusing
on improvements of environmental performance in terms of
reducing (undesired) outputs (i.e. emissions) from production is
unlikely to bring about a positive influence on econom ic
perfor mance beyo nd relatively low l evels of environmental
performance. However, the debate is still o n-going whether the
green product design is really imp roved the economic p erfor-
mance (Tyteca et al., 2002).
Commission of the European Communities (2001) defines green
product innovation as products that reduce the negative impacts
and risks to the environment, utilize less resources and prevent
waste generation in the product’s disposal phase. In other words,
green product innovation not only protects the natural environ-
ment, but also provides environmental benefits higher than
conventional products (Reinhardt, 1998).
Moreover, EEIG (2004) points out that product innovation have
the biggest impact on the environment (Hoffmann, 2007;
Kammerer, 2009). Poor product design and environmental stan-
dards of developing countries (i.e. in the product’s disposal phase)
could turn waste issues into serious problems in the future (Puckett

issues to ensure survival and development in the market. This is
especially true in the motorcycle industry where environmental
issues are becoming the main concern (Hoffmann, 2007). However,
Berthon et al. (1999) show that there are conflicting results
between market demand and firm performance. Market plays
a critical role in firm’s innovation performance but a firm’s
performance does not necessarily depend on it. However, market
demand is the key to firm performance in the market place.
Atuahene-Gima et al. (2005) confirmed that working closely with
customers, and particularly influential customers a firm may
uncover latent customer needs. Oltra and Jean (2009) argue that
pollution and environmental criteria have a little impact on
customers’ preferences. On the contrary, fuel consumption and
price are the important criteria to be considered in their purchase
beha
vior (Meyer and Clavel, 200 6). Hence, manufacturing firms
that pioneer in their green products will take the “first mover
advantage” and meet customers green demand. Hence:
H3. Market demand is positively associated with firm
performance
Fig. 2 shows the relationship among market demand, green
product innovation and firm performance.
Fig. 2. Conceptual framework.
R J. Lin et al. / Journal of Cleaner Production 40 (2013) 101e107 103
4. Methodology
4.1. Data collection
To test the hypotheses, this study selected the Vietnam motor-
cycle industry as the empirical setting. It is not practical to survey
all the motorcycle manufacturers in Vietnam. Thus, in this study,
two criteria were used to narrow down the potential manufacturers

respondent list. Only respondents that have knowledge of market
demand, green product innovation, and firm performance will be
targeted. The respondents of the questionnaires included CEOs,
Manufacturing Director, Marketing Director, and R&D managers.
The respondents were askedto returnthe completedquestionnaires
through email. Questionnaire was initially developed in the English
version. To ensure conceptual equivalence, it was translated into
Vietnamese and then back-translated into English by independent
translators. The questionnaire survey items were based on existing
literature. Before mailing to the respondents, three experts were
asked to pre-test the questionnaire. Feedback from the experts was
used to improve the questionnaire. In the second pre-test, the
revised questionnaires were e-mailed to eight CEOs or managers of
customer care, marketing, manufacturing, and management and
research and development (R&D) departments in different motor-
cycle firms. They were asked to fill in the questionnaire and identify
any vagueness in the survey items. A five-point Likert scale with 1
representing “strongly disagree
” t
o 5 representing “strongly agree”
was adopted in this study.
4.2. Variables and measures
The questionnaire consisted of four parts. The first part of the
questionnaire comprised the descriptive data such as number of
employees, year founded, market size, product names, and turn-
over. The second part is the measurement of market demand; the
third part is the measurement of green product innovation
and the fourth part is the measurement of firm performance.
Table 1 shows the variables for each of the constructs in the
questionnaire.

of gasoline/fuel
Partnership with green
organizations and suppliers
Using eco-labeling
Improvement of environmental
compliance
Use of environmental
friendly material
Chiou et al. (2011),
Awasthi
et al. (2010)
Green products Increase of the product’s variety
Design for recycling
Quality improvement
Expanding the market coverage
of green product
Raising the manufacture
technology of new green product
Li et al. (2010),
Triebswetter and
Wackerbauer (2008)
Economic
performance
Increase of investment for
environmental friendly technology
Decrease of cost for hazardous
materials purchasing
Zero customer complaints or returns
Zhu and Sarkis
(2004), Tseng

It shows that market demand has significant positive correlations
with environmental performance, green products, economic
performance, and firm performance. Moreover, there were signif-
icant positive correlations among environmental performance,
products, economic performance with firm performance.
5.3. Regression analysis
Table 5 shows the results of the regression analysis. In Model I,
Model II and Model III, the results show that market demand was
positively correlated to the three types of green product innovation
performance: environmental performance, products and economic
performance. Hence, H1a, H1b and H1c were supported in this
study. In Model IV, the results show that market demand, envi-
ronmental performance, products and economic performance were
positively correlated to firm performance. Accordingly, H2a, H2b,
H2c and H3 were supported in this study. In addition, this research
also verified that the three types of green product innovation had
partial mediation effects between market demand and firm
performance. This study found that market demand had positive
effects on environmental performance, products, economic
performance and firm performance.
In general, the results in Table 6 shows green product innovation
had positive effect on firm performance. The empirical findings
indicate that all hypotheses in this study were supported. It means
that if a firm manages the market demand well, then its green
product innovation performance and firm performance will
improve. Hence, investment in environmental performance, prod-
ucts and economic performance combining with a better under-
standing about customers’ requirements is helpful to businesses.
Indeed, manufacturers should understand the market demand and
implement

Economic performance 3 0.86 Acceptable
Firm performance 4 0.89 Acceptable
Table 4
Correlation coefficient matrix.
Market
demand
Environmental
performance
Green
products
Economic
performance
Firm
performance
Market demand 1.00
Environmental
performance
0.76
**
1.00
Green products 0.73
**
0.75
**
1.00
Economic
performance
0.75
**
0.53

Independent variables
Market demand 0.56 0.67 0.79 0.56
Green product
innovation
Environmental
performance
0.45
Green products 0.58
Economic
performance
0.43
R
2
0.48 0.52 0.59 0.63
Adjusted R
2
0.48 0.52 0.59 0.63
N 208 208 208 208
F 25.264 32.07 38.117 120.52
Table 6
Results for hypotheses.
Hypotheses Support
(Yes/No)
H1a: Market demand is positively associated with
environmental performance
Yes
H1b: Market demand is positively associated with
products
Yes
H1c: Market demand is positively associated with

This study provides both theoretical and methodological
contributions to existing sustainability body of knowledge, espe-
cially in the motorcycle industry in Vietnam. In a highly competitive
market, obviously, implementing green product innovation is
necessary in order to differentiate a firm product and to achieve
competitive advantage. However, the findings of this study suggest
that firms should first understand consumers’ requirements, and
then align green product innovation initiatives with consumers’
values. In today’s green conscious market, fuel consumption,
exhaust emission, price and identity (brand and design) are the key
criteria that consumers will consider when purchasing a motor-
bike. Fuel (especially gasoline) is scarce and its price is ever
increasing. Consumers also wanted products to be produced in the
most environmental friendly ways. Thus, the success of a firm green
product innovation is depending on its appreciation of market
demand as well as sustainable business operations.
The findings of this study also indicate that motorcycle fi rms
should pay attention to their products and economic performance,
in addition to environmental performance. Environmental perfor-
mance is just an outcome while products and economic perfor-
mance are necessary conditions for achieving green product
innovation performance. Manufacturers should enhance quality, as
well as developing new environmental friendly motorbike tech-
nology in order to surpass competitors and establish a leadership
position. Design of new motorbikes should be impressive, eye-
catching and practical (i.e. its U-box must be large to store one or
two helmets). In addition, firms should reduce unnecessary costs in
the production in order to keep the price low and be consistent
with consumers’ needs. In other words, this study demonstrated
that green product innovation is an important strategy for motor-

meet the needs of their market.
This study contributes to the existing body of literature in two
ways. First, the research pioneers the effort in taking market
demand perspective in understanding how customer value affects
a firm’s green product innovation orientation and consequently its
organization performance. Second, this study considers customer
reactions to motorcycle manufacturers’ market offerings (new
production introduction). The results indicate that a firm excels in
green innovation can attain higher levels of market performance. In
other words, it is vital to meet customers demand in enhancing
organization performance.
This study is not without its limitation, as the main focus is on
the motorcycle manufacturing industry in Vietnam. However, the
findings of this study could be generalized to other motorcycle
markets, especially in Asia. Further studies could include other
industries in Vietnam (such as automotive) or a comparison study
with other country (such as China). The variables of three main
constructs were chosen from literature reviews and may not be
comprehensive. Future studies may include wider variables to
examine the effects of market demand, green product innovation
and firm performance in more depth.
Acknowledgment
The author thanks Mandy Hangnguyen for her contributions to
this paper. The empirical data and statistical analysis were based on
her Master’s project.
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